TaxTMI 
TaxTMI 
2019 (12) TMI 314
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....ai (in short ITO/ AO) for the A.Y. 2014-15 vide order dated 29.12.2017 under section 143(3) of the Income-tax Act, 1961 (hereinafter 'the Act'). 2. The only issue in this appeal of assessee is against the order of CIT(A) directing the AO to restrict the addition by estimating profit percentage at the rate of 3% on bogus purchases. 3. Briefly stated facts are that the assessee is trading in Diamond. The AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties, as listed in hawala dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to Rs.9,23,99,829/- as admitted by these h....
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....diamonds, the profit element embedded estimation (c) 100% is correct or not. Coming to the profit margin in the trade, the taskforce group for diamond industry constituted by the Government of India, Ministry of Commerce and Industry, after considering the BAP scheme, recommended presumptive tax for net profit calculated (c)2% of trading activity and (c)3% for manufacturing activity or 02.5% across the board. It is also ascertained that the operating profit in case of diamond trading for computation of ALP by the TP wing is consistently in the region of around 1.75% to 3°/u. It is also brought to my notice that the AOs are also adopting 3% on the purchases made from Shri Bhanwarlal lain group concerns, as the profit element embedded, in....
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.... the ld. Departmental representative (for short 'D.R'), perused the orders of the lower authorities and the material available on record. We have given a thoughtful consideration to the facts of the case and are of the considered view that the CIT(A) had by way of a very well-reasoned order restricted the addition in the hands of the assessee to the extent of 3% of the aggregate value of the purchases which were claimed by the assessee to have been made from the aforementioned dummy concerns, viz. (i) Mohit Enterprise; (ii) Mayur Exports; and (iii) Prime Star. We find that it remains as a matter of fact borne from record that the assessee had failed to substantiate the genuineness and veracity of the purchases which were claimed to have bee....
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....d the purchase transactions under consideration as genuine. We are further persuaded to be in agreement with the CIT(A) that now when the sales of the assessee had not been doubted and dislodged by the A.O, therefore, it could safely be gathered that the assessee had purchased the goods under consideration, though not from the aforementioned dummy concerns from whom bogus bills have been taken, but from certain unidentified parties operating in the open/grey market. We are further of the view that the CIT(A) had rightly appreciated that the addition in the hands of the assessee was liable to be restricted only to the extent of the profit element which was embedded in making of purchases from the open/grey market. We find that the CIT(A) tho....